English

Linear Rescaling to Accurately Interpret Logarithms

Econometrics 2021-10-07 v3

Abstract

The standard approximation of a natural logarithm in statistical analysis interprets a linear change of pp in ln(X)\ln(X) as a (1+p)(1+p) proportional change in XX, which is only accurate for small values of pp. I suggest base-(1+p)(1+p) logarithms, where pp is chosen ahead of time. A one-unit change in log1+p(X)\log_{1+p}(X) is exactly equivalent to a (1+p)(1+p) proportional change in XX. This avoids an approximation applied too broadly, makes exact interpretation easier and less error-prone, improves approximation quality when approximations are used, makes the change of interest a one-log-unit change like other regression variables, and reduces error from the use of log(1+X)\log(1+X).

Cite

@article{arxiv.2106.03070,
  title  = {Linear Rescaling to Accurately Interpret Logarithms},
  author = {Nick Huntington-Klein},
  journal= {arXiv preprint arXiv:2106.03070},
  year   = {2021}
}

Comments

9 pages, 1 figure, 1 table

R2 v1 2026-06-24T02:52:46.173Z